Marketplace interviewed me for this morning’s coverage of Priceline’s earnings report.
“It’s not just William Shatner, but the whole company has to boldly go where no travel company has gone before,” says Gary Leff, who writes the viewfromthewing.com blog. “They haven’t quite figured out how to teleport themselves into the future of online travel.”
Leff says Priceline’s third quarter earnings report will give a glimpse of the success of the company’s strategy of growth through the acquisition of other companies.
Priceline as a company bears almost no relation to the brand that you think of — William Shatner, bidding for hotels and airfare.
At one point years ago they were going to revolutionize travel — and everything else. They were going to be the platform to liquidate excess unsold inventory well beyond room nights and into gas and home mortgage lending. They didn’t become that and we now talk about Uber as revolutionizing the way we take underutilized resources and put them to work much more efficiently. (It’s what makes me skeptical of Uber’s valuations, as much as I love Uber’s convenience as a user.)
As I explained in late spring:
Fifteen years ago the most valuable thing Delta owned was shares in Priceline — the company liquidating unsold airline inventory was worth more than the carrier that actually had that inventory.
…In a blast from the past, two years ago Priceline had a market capitalization greater than all US airlines combined. That’s no longer the case, with Delta, American, United, and Southwest alone combining for about 50% more market value than Priceline today. But that means Priceline is worth nearly twice as much as any single U.S. airline.
Priceline took their big valuations and acquired other businesses — like Kayak and Booking.com, and this past summer OpenTable.
They’ve added revenue to their financials, and in some cases purchased good businesses. Kayak is a market leader. OpenTable doesn’t have competitors with the same kind of reach. They’ve paid a real premium for some of these acquisitions.
What Priceline doesn’t have is a clear idea of how it will revolutionize an industry any longer. And with their acquisitions it’s not obvious how their ownership makes these other companies better off, or how bringing together these various strategic assets makes the whole more valuable than the sum of the parts.
The best explanation of OpenTable in this regard that I’ve heard to date is that Priceline can sell dining reservations alongside travel. That’s an underwhelming narrative, to say the least.
Cross-selling happens now, such as event tickets on Expedia when you buy related travel.
It’s been the dream at least since United CEO Dick Ferris renamed the company ‘Allegis’ in 1987 to represent the integration of the airline with its owned hotel and car companies. That experiment lasted about 15 months before Ferris was gone and the company was again called ‘United’. (At various points, Westin, Hilton, and Hertz were United subsidiaries — so it’s interesting to see Hertz again in such close partnership with United, while Westin’s parent is hooked up with Delta and Hilton without an exclusive airline dance partner.)
Priceline had an early lead and was dubbed sufficiently revolutionary that it was able to attract capital and buy good businesses. But I view its revenue growth as being mostly about bringing other companies onto its own financials, rather than reflecting the strong successes of its core capabilities.
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